GBP/USD Forecast: Cable Recovers but the Outlook Remains Murky. WIll NFP Data Serve as a Catalyst?

[Ben Graham]

GBPUSD has found support after a selloff on Tuesday caused largely by fiscal concerns which has UK gilt yields to edge higher. The 30-year gilts reached a high of 5.595%, the highest level in 25 years.

Despite all the concerns around UK Gilt Yields, it is important to note that the selloff was widespread across Europe, with Japan following suit in the Asian session today.

The other concern for the Pound stems from fiscal sustainability. Market participants are wondering if the government can fix the budget problem and stop adding more debt without making big, strict changes.

Cable dropped to a low on Tuesday around the 1.3440 handle. However, this is a key apport level and it would appear that cable bulls have once again found their legs.

Comments by UK Chancellor of the Exchequer Rachel Reeves that the administration will focus on "bringing inflation and borrowing costs down by keeping a tight grip on day-to-day spending and enforcing fiscal rules", have also provided some relief to the Pound Sterling.

Read More: Gold Hits All-Time High Amid Flight to Safety

However, given Government plans moving forward there remains more questions than answers. Chancellor Rachel Reeves plans to raise 50 billion GBP in taxes in this upcoming budget meaning further pressure on businesses and consumers may be on the horizon.

Should the government go ahead with its proposed plans to lower the VAT threshold, this could have an impact on the SME sector and thus damage the UKs attractiveness for investment.

All in all the picture for the GBP does not look positive moving forward, especially given my view of further rate cuts from the BoE. I can see GBP struggling in the weeks ahead.

US Dollar Index (DXY) and NFP

The US dollar index has enjoyed a positive start to the week, but that optimism appears to be fading ahead of the highly anticipated NFP release on Friday.

Just a short while ago we heard comments from Federal Reserve Policymaker Rafael Bostic saying “I am not ruling out a September rate cut depending on the coming jobs report and other data.” If you didn't understand the weight of this week's job data I hope these comments shed some light on the fact.

The US Dollar is dealing with its own set of challenges and concerns around Fed independence.

The DXY at this stage is at a crucial inflection point ahead of the NFP release. A strong print could help the USD recover while weak job numbers could lead the DXY to fresh YTD lows.

The technical picture does hint at further upside for the DXY given that we have printed a triple bottom pattern which would hint at further upside.

US Dollar Index (DXY) Daily Chart, September 3, 2025

Source: TradingView

Technical Analysis - GBP/USD

From a technical point of view, GBP/USD has been stuck in a range between the 1.3584 and 1.3378 since August 7.

Market participants will be hoping that the NFP release could be a catalyst to push cable toward a breakout and substantial move, regardless of the direction. Traders after all thrive on volatility.

TTodays bounce off support for cable does appear to have some momentum, but the RSI period-14 remains below the 50 handle which hints at bearish momentum.

A break above the 50 on the RSI and a potential move above the 1.3500 handle may bring more buyers to the table.

Any such move though is highly unlikely ahead of the NFP release.

GBP/USD Daily Chart, September 3, 2025

Source: TradingView

Client Sentiment Data - GBP/USD

Looking at OANDA client sentiment data and market participants are long on the GBP/USD with 55% of traders net-long. Much like the range we are seeing on GBP/USD the sentiment data does little to provide any insights except reflect that traders remain indecisive as to Cables next move.

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